Monday, November 27, 2006

The TCP/IP of Advertising?

In “The Search” (which I am finally ‘reading’), Battelle starts out by discussing the ‘database of intentions’. (Briefly: when we search, we are declaring our need or ‘intent’ to find something, and that is why, as first hypothesized by Bill Gross, Search is such a powerful place to attract advertisers that hope to fulfill that need.) Intent is certainly very powerful, but I wonder if, by concentrating too much on the paradigm of Intent / Search in the past few years, analysts, as well as Google’s competitors, missed out on one of the big areas where Google added a lot of value. Some one had pointed out to me a couple of years ago that Google really made it easy and effective for small (and large) businesses to advertise on the internet. “Had you ever tried to advertise on the internet before Google Adwords?” he asked rhetorically.

It seems like it took a while for the internet giants to realize that there is a real demand for making life easier on advertisers and publishers - without necessarily tying ads to Intent/Search, or deep data-driven and behavioral technologies which try to deduce intent. (BTW - I think Adbrite may be trying to do just in the realm of banner ads.)

That is how I view the recent forays by the giants in offline advertising – they are trying to meet that simple demand for ease of use and efficiency, and applying it to other sectors. As per the NY Times: “Google hopes to one day provide a place where advertisers can buy ads in all types of media, said Tim Armstrong, Google’s vice president for ad sales.” Or, as Robert Young of GigaOm put it:

“Simply put, Google is building what is essentially an operating system (”OS”) for advertising… one that will work across all media. Just like Microsoft’s Windows (or any other OS) manages all the hardware and software resources of a computer, Google’s Ad/OS will similarly manage all the critical components of an ad campaign, regardless of media type.”

Ultimately, we can safely assume that one or more of the internet giants will successfully create an integrated advertising O/S. When that happens, the more interesting question then becomes:

How would you compete with an Ad O/S, and disrupt that business model?

One potential answer: You disintegrate the network and open it up. If Google (or Yahoo) becomes the Windows of the Ad O/S world, then what would the Linux of ad networks look like? Can one commoditize the mediation of advertising and shift value to the service providers around the network? Or put another way: Can the “Ad Network” be less of an operating system, and more like a free and open communication protocol? What would it take to create the TCP/IP of advertising on the internet?

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Note: In thinking about this question, I remembered a great passage from “The Perfect Store”, talking about how eBay bought Up4Sale just before filing to go public. Up4Sale’s founders “had an eBay-like understanding of the importance of community [i.e. the network of buyers and sellers]…Advertiser supported Up4Sale was free for users – a business model eBay considered a threat to its own fee based approach.” eBay then proceeded to kill the Up4Sale business model. One could argue that this effectively held off the real competition until Craigslist came along. A brilliant move by eBay... but at the end of the day, it's just a matter of time: On the web, what can be disrupted will!